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Slovenia Business Week no. 37/2004: Gaspari: Inflation Rate to Drop below 3% Next Year

If Slovenia wants to introduce the euro in two years, it will first have to meet all the relevant Maastricht criteria

If Slovenia wants to introduce the euro in two years, it will first have to meet all the relevant Maastricht criteria, and inflation is still quite a significant problem, Bank of Slovenia Governor Mitja Gaspari said at a meeting of businessmen from the coastal region on Monday, 6 September.

Due to high oil prices, Slovenia's inflation rate stood at an annual 3.7 percent in August, which is more than had been expected, Gaspari observed.

Next year Slovenia's inflation rate is expected to drop below 3 percent, provided there are no major price increases and surprises on the market, Gaspari went on to say.

Now that Slovenia is in the ERM II, it is to face two key periods of verification of the Maastricht standards, namely in May and June 2005 and 2006, Gaspari pointed out.

According to the Maastricht criteria, the inflation rate of EU member states that want to introduce the euro must equal that of three members with the lowest inflation rate.

Slovenia and some other countries though believe that it would be more logical to adapt to the inflation rate represented by the euro, as the new member states are joining a system with a common central bank, whose aim is to keep the annual inflation rate around two percent.

"It is about the relationship between big and small countries. The big ones set the rules, and the small ones must respect them," Gaspari said.

Our entry in the ERM II affects the rate of the tolar, which must be stable without major or too frequent interventions on the part of the central bank, Gaspari explained, adding that the Bank of Slovenia has only intervened once so far.

According to the central bank governor, Slovenia's preparations for the euro are being quite efficient, the government, the Bank of Slovenia, the Bank Association of Slovenia and the Chamber of Commerce having drafted a good project for the introduction of the euro.

Participation in the project is expected by the Slovenian Consumers' Association, as the new currency will be especially important for them. Gaspari in fact hopes that prices could start being marked in tolars and euros as soon as possible, so that people can start getting used to the new currency.

Source: Slovene Press Agency STA

Author: Branka Murn